Annual Report 2010 MAÎTRE CHOCOLATIER SUISSE DEPUIS 1845

Transcription

1 Annual Report 2010

2 K e y f i na nc i a l data annual r EPORT 2010 Data per share Change in % Non-diluted earnings per share / 10 PC 1) CHF 1, Operating cash flow per share / 10 PC CHF 1,580 2, Dividend per share / 10 PC CHF 450 2) Payout ratio % Shareholders equity per share / 10 PC CHF 7,266 7, Price registered share at December 31 CHF 30,100 25, Price participation certificate at December 31 CHF 2,826 2, Market capitalization at December 31 CHF million 6, , ) Based on weighted average number of registered shares / 10 participation certificates 2) proposal of the Board of Directors Income Statement Change in % Sales CHF million 2, , EBITDA CHF million in % of sales % EBIT CHF million in % of sales % Net income CHF million in % of sales % Operating cash flow CHF million in % of sales % Balance Sheet Change in % Total assets CHF million 2, , Current assets CHF million 1, , in % of total assets % Non-current assets CHF million in % of total assets % Non-current liabilities CHF million in % of total assets % Shareholders equity CHF million 1, , in % of total assets % Investments in PPE / intangible assets CHF million in % of operating cash flow % Employees Change in % Average number of employees 7,572 7, Sales per employee TCHF

3 Content Annual REPORT Chairman s report 06 Review Highlights Our Shareholders favorite chocolate 14 Markets 24 Corporate Social Responsibility 30 Report Conquering the New World 36 Corporate Governance 53 Consolidated Financial Statements of the Lindt & Sprüngli Group 58 Notes to the Consolidated Financial Statements 89 Report of the Statutory Auditor 90 Financial Statements of Chocoladefabriken Lindt & Sprüngli AG 94 Proposal for the Distribution of Net Earnings 95 Report of the Statutory Auditor 96 Five-Year Review 98 Group Addresses Lindt & Sprüngli

4 2 C h a i r m a n s r e p ort Annual R eport 2010 financial year 2010 chairman s report DEAR SHAREHOLDERS The economic situation is recovering slowly, or at least stabilizing, and has been accompanied in most countries by a noticeable improvement of consumer sentiment, albeit to varying degrees. Against that background, it is my pleasure to report that, as we had been expecting, the organic growth and earnings situation at Lindt & Sprüngli far exceeded the overall market trend in the last financial year. This good progress is the outcome of the development measures which we had already put in hand in 2009, as a targeted response to the global economic crisis so as to be fit for the future and in a position to benefit fully from a fresh upturn. The fact that our forecasts have turned out to be correct clearly shows that our tried and tested long-term business model has the flexibility needed to develop efficient strategies which permit strong performance, even under the most challenging economic conditions. We continue to subscribe fully to this successful business model for profitable growth, founded on an all-round commitment to quality, and built upon seven pillars: brand management, premium positioning, close ties to consumers, innovation, marketing expertise, production know-how and geographical expansion. Despite the stabilization of the economic environment which was observed almost everywhere, the year 2010 brought many challenges for the economy. The Swiss franc, which had already appreciated in the previous year, gained further in value against important currencies such as the euro, the US dollar and the pound sterling, making direct exports from Switzerland to the countries concerned much more difficult. In general, the commodity markets were typified by high volatility. For the whole chocolate industry, massive increases in the price of cocoa beans, especially during the first three quarters of 2010, reaching a record high not seen for the past

5 3 C h a i r m a n s r e p ort Annual R eport years, proved to be a serious challenge. At the end of 2010, prices moved down again slightly, but a speculative environment persists. It is aggravated by political uncertainty in the Ivory Coast and set to remain volatile. After consumer sentiment had suffered greatly all over the world because of general uncertainty and the difficult economic conditions prevailing in 2009, private consumption recovered strongly almost everywhere in the past financial year. Slowly but surely, consumers regained confidence in the future. This led to a further increase in quality awareness which had some positive impact on the premium chocolate segment, and hence also on the trend in value of the chocolate markets, even though these tended to move sideways for the most part in volume terms. The feeling of confidence which grew steadily among consumers as the year under review advanced, and a renewal of the firm commitment to trusted premium products, higher quality and more lifestyle, not only favored the year-round business of Lindt & Sprüngli but also had a particular impact on its important seasonal activities. With key products present globally such as LINDOR truffles, which achieve substantial growth rates year on year, or the EXCELLENCE tablet line, constantly augmented by new flavors, to say nothing of its other traditional and popular creations, Lindt & Sprüngli once again succeeded in further consolidating the market position of its first class premium offering, thanks to the high added value offered to consumers. The other pillar of the LINDT brand is an impressive ability to innovate, based on a comprehensive and far-reaching understanding of fast-changing consumer habits. Our many innovations start with systematic consumer tests and soundly based market analyses, backed by the creativity of our Maîtres Chocolatiers and their willingness to strike out time and time again on unusual paths in the development of their surprising recipes, and to set new trends. We owe it to our in-depth knowledge of the markets and proximity to consumers, together with our intensified and targeted marketing activities, that we were able to achieve consolidated group sales worth CHF 2.58 billion (previous year: CHF 2.52 billion) in the past financial year. After currency adjustments, this is equivalent to organic growth of around CHF 175 million or 7.3% on the previous year, well above the average for the chocolate market as a whole. In fact, we were able to win further shares in all the important markets and segments. We particularly welcome the fact that all the Group subsidiary companies contributed to this good performance with strong growth rates, sometimes running into double figures, for example in North America and in the United Kingdom. Only in Australia did sales in the wholesale trade fall somewhat short of expectations, although our own LINDT Chocolat Cafés were able to report well above average growth. The last financial year again saw many highlights. I would like to take this opportunity to mention two of the most important events. June 16 marked the inauguration of a new factory building at our production site in Stratham, NH (USA); this hosts a facility for the production of cocoa mass which was previously imported from Switzerland. With this major investment

6 4 C h a i r m a n s r e p ort Annual R eport 2010 made with an eye to the future, each distinct phase of production from cocoa-bean roasting to the finished product can now be handled locally in the USA. This is an important step towards assuring even better services for our clients and consumers in terms of freshness and supply flexibility; it also makes us far more independent of expensive and environmentally unfriendly transport routes, and of currency risks. Today, we benefit from the very latest technologies in every area of manufacturing and logistics in the USA. Another noteworthy event, which attracted considerable attention in the national and international media and hence the interest of a public extending well beyond the borders of Switzerland, was the magical LINDT Christmas Lighting Event on November 16. In the presence of more than 8,000 enthusiastic spectators who had come to admire the impressive Christmas illumination of our over a century old Kilchberg plant, tennis champion and LINDT brand ambassador Roger Federer opened this exceptional lighting show. Lindt & Sprüngli not only lived up to the sales expectations announced for the year 2010 but also met its earnings forecasts. The operating result (EBIT) rose by 22.8% to CHF million (previous year: CHF million) which is within the published range. Our profit margin improved by 210 basis points to 12.6% (previous year: 10.5%). The net profit advanced even more strongly by 25.3% to CHF million, equivalent to a return on sales of 9.4% (previous year: 7.6%). At the end of 2010 the cash flow stood at CHF million. The equity ratio and average return on equity stood at 66.2% and 14.7% respectively. This robust capital structure proves that Lindt & Sprüngli has emerged strengthened in every respect from the global economic crisis. Our aim has always been to manufacture the most innovative products of the highest quality and to market our premium brands professionally. For this purpose the finest raw materials, a high level of know-how and creativity, accompanied by a broad understanding of the market characteristics and consumers needs are required. Then again, it is vitally important for us to update our production sites and installed machinery constantly to the latest state of technological art, and make sure that they always meet the most recent standards. The good operating results and sound balance sheet structure of our business provide the essential financial basis for ongoing investments to strengthen our competitiveness, both in the marketing area and also in relation to the industrial and technological capabilities of our group of companies. Thanks to a substantial volume of investments in plant and information technology totaling CHF 1.2 billion over the last ten years, our eight production sites in Europe and the USA are today among the most modern and efficient in the chocolate industry anywhere in the world. Our long-term objectives of profitable growth, both now and in the future, are established on this solid foundation. While the trend of the SMI ( 1.7%) and the SPI (+ 2.8%) did not fully reflect the distinct economic upturn at the end of 2010, the stock market did pay tribute to the good performance and solid substance of our business through well above-average performance of Lindt & Sprüngli securities (registered share: %, participation certificate: %), which reached highs for the year in the autumn months and finally peaked in December. The long-term success poten-

7 5 C h a i r m a n s r e p ort Annual R eport 2010 tial of our group of companies provides the best foundation for the continuation and further enhancement of these positive trends. In view of our reported sales and profit growth, the Board of Directors will be proposing to the next General Meeting on April 28, 2011, the distribution of a dividend of CHF 450. per registered share and CHF 45. per participation certificate. This represents an increase of 12.5% on the previous year. These good results have been made possible by more than 7,500 motivated and dedicated employees at every level in our international organization, who identify day after day with the company and with our products. The Board of Directors and the Group Management owe them a debt of gratitude and recognition. We also want to take this opportunity to thank all our business partners for their close and valuable cooperation, and our loyal shareholders who have placed their confidence in the company across the global stock market crisis of the last two years, and, by doing so, demonstrated their trust in the sustainable success of our company. outlook A further recovery of the global economy and an improvement of consumer sentiment can be expected in the current financial year. With a pipeline packed with new products and ideas, Lindt & Sprüngli is well placed to benefit from this trend and continue to grow faster than the markets as a whole, to improve its profitability and strengthen its position as a global leader in the premium chocolate segment. Ernst Tanner Chairman and Chief Executive Officer

8 6 R E V I E W Annual R eport 2010 REVIEW of 2010 corporate highlights JANUARY 2010 Chocolate World, BeIjing JUNE 2010 OPENING OF THE CHOCOLAT CAFE, TOKYO In the course of the first chocolate exhibition in the growth market of China, 300,000 LINDOR truffles were distributed to the enthusiastic visitors. June saw the opening of the first LINDT Chocolat Café in Tokyo, in the popular Ginza shopping district. With the establishment of a dedicated subsidiary, the Japanese market can be serviced even more efficiently at local level in future. JUNE 2010 opening FACTORY EXTENSION, STRATHAM OCTOBER 2010 OPENING first LINDT BOUTIQUE, MUNICH Ernst Tanner, CEO and Chairman of the Board of Directors of the Group, and Thomas Linemayer, CEO of Lindt & Sprüngli (USA) Inc., inaugurated the factory extension in Stratham, NH. The multi-million-dollar investment to increase capacity was spread over a construction phase of four years. In the context of the new retail concept, the first LINDT boutique was opened in October 2010, in the heart of Munich s shopping district. For 2011, further boutique openings at selected locations in Germany are planned.

9 7 R E V I E W Annual R eport 2010 LINDT brand ambassador ROGER FEDERER january 2010 opening chocolat cafe, melbourne DECEMBER 2010 MATCH FOR AFRICA, zurich In his first official appearance as LINDT s brand ambassador, Roger Federer opened the new LINDT Chocolat Café during the Australian Open in Melbourne. This brings the number of successful Chocolat Cafés in Australia to six locations. LINDT was one of the sponsors of the Match for Africa. The two tennis greats Federer and Nadal played for a good cause in front of 10,000 spectators at Zurich s Hallenstadion. The match proceeds of CHF 2.5 million went to the Roger Federer Foundation. November 2010 LINDT CHRISTMAS LIGHTING, KILCHBERG The Lindt & Sprüngli chocolate factory in Kilchberg formed the backdrop to a spectacular light show. Brand ambassador Roger Federer, CEO Ernst Tanner and LINDT Maître Chocolatier Urs Liechti gave the starting signal for the festive projections of internationally renowned light artist Gerry Hofstetter. To a soundtrack of familiar Christmas songs, the chocolate factory bathed in the light of 24 impressive motifs. A crowd of around 8,000 people gazed in awe at the Christmas themes and enjoyed the magical Advent landscape at the site.

10 8 H ig h l ig h t s Annual R eport 2010 Highlights 2010 pralines SWITZERLAND ConnaisseurS germany Hochfein After two years of intensive revamping, the LINDT Maîtres Chocolatiers are proud to present the relaunch of the CONNAISSEURS pralinés. Refined recipes, new shapes and flavors; an absolute delight! The classic from LINDT in Germany. An established composition of the finest nougat, marzipan, truffle, almond cream and nut pralinés. In attractive new gift packs every spring. Each praliné is a masterpiece! france Champs-ElysEes duty free Lindt Perles A popular traditional product during the Christmas period in France. The packaging captivates with its enchanting premium design, and inside is a diverse collection of the finest pralinés. The perfect gift! The perles consist of a nutty center, such as roast almonds and hazelnuts, which are coated with a hint of vanilla, cappuccino cream or aromatic gianduia. An irresistible taste experience!

11 9 H ig h l ig h t s Annual R eport 2010 tablets Switzerland Excellence Caramel INTENSE scandinavia Excellence Fleur de Sel Bittersweet dark chocolate coupled with crispy caramel pieces and finely chopped almonds are the secret of the incomparable taste experience of this EXCELLENCE tablet. A very sweet temptation! EXCELLENCE with a hint of sea salt opens up an extremely aromatic taste experience, particularly for lovers and connoisseurs of bittersweet chocolate. Give it a try! switzerland passion chocolat GHIRARDELLI usa Ghirardelli This tablet innovation surprises with its refined combination of top-quality chocolate, and exquisite special ingredients such as orange and pistache or caramel and sea salt. An exclusive chocolate composition of the LINDT Maîtres Chocolatiers! A perfect blend of velvety dark chocolate, with a hint of the finest sea salt and crunchy roast almond pieces. An incomparable tablet for discerning gourmets!

12 10 H ig h l ig h t s Annual R eport 2010 seasonal products ghirardelli usa Premium Chocolate Assortment caffarel italy Caffarel Fondenti emozioni The popular Ghirardelli SQUARES in different flavors are now available in beautiful spring boxes with a window. The ideal gift for Mother s Day! Caffarel Gianduia: This premium gift egg is made from the finest milk chocolate, filled with a surprise present and lavishly packaged. A popular bestseller in Italy during the Easter holidays! usa Nutcracker Drum Box germany Lindt Goldstücke The Nutcracker Drum Box was specially designed for the Christmas holidays and is filled with delicately melting milk, dark and white LINDOR chocolate truffles. A touch of luxury under the Christmas tree! With GOLDSTÜCKE, the LINDT Maîtres Chocolatiers have lovingly created a high-quality gift box filled with an exclusive selection of fine LINDT chocolate truffles with special Christmas recipes. For all those who appreciate festive elegance!

13 11 H ig h l ig h t s Annual R eport 2010 our shareholders favorite chocolate competition results thank you for your participation! 1 st Place excellence orange In the 2009 annual report, we asked our shareholders to name their favorite chocolate tablet. The number of response was overwhelming. By the end of the year, more than 8,000 replies had arrived at our headquarters. After sifting through them, there were three clear favorites, which we reveal on this page. We would like to thank you, our valued shareholders, for your loyalty and dedication. The EXCELLENCE Orange Intense tablet turned out to be by far our shareholders favorite chocolate. Delicate orange pieces and crispy chopped almonds in bittersweet chocolate combine to make an incomparable taste experience. An especially fruity and aromatic creation. 2 nd place les grandes dark 3 rd place mousse au chocolat lait Discover this unique composition of whole roast hazelnuts and crunchy caramelized nut pieces in the finest LINDT dark chocolate. All nut-lovers, please pay attention: no other chocolate has more whole nuts than the LINDT LES GRANDES tablet! The LINDT Maîtres Chocolatiers have created light and airy chocolate varieties with love, dedication and real trend intuition. Third place in the list of our shareholders favorite tablets goes to the MOUSSE AU CHOCOLAT Lait made from the finest milk chocolate.

14 1899 Staff move into the new factory in the district of Bendlikon, in the municipality of Kilchberg by Lake Zurich. Founder Rudolf Sprüngli-Schifferli drew up the first plans for this himself. Rudolf Sprüngli-Ammann A chocolate pioneer of the first order. Together with his son, he produced chocolate in solid form for the first time in German-speaking Switzerland in European Cocoa Center The plant in Olten has been producing cocoa mass for Switzerland, Germany and Italy since A LINDT factory shop was also opened in The plant site in Kilchberg 2010 Significant investment in modernizing the headquarters has seen production volume almost treble compared with previous years. Ground-breaking ceremony in Altendorf The site was expanded into a logistics center in 2007 and is now a hub for our export products.

15 WHERE Tradition MEETS modernity In 1995, I assumed operational control of Lindt & Sprüngli in Switzerland, just when the company was celebrating its 150 th anniversary. In the past 15 years, we have continuously expanded our Swiss head office and made huge progress with lots of innovations. For instance, the LINDT Maîtres Chocolatiers have consistently advanced the traditional Swiss art of making pralinés. In our 80-plus export markets, our pralinés are the best ambassadors of high-quality craftsmanship made in Switzerland. Kamillo Kitzmantel CEO CHOCOLADEFABRIKEN Lindt & Sprüngli (Schweiz) AG Lindt & Sprüngli in Kilchberg, switzerland The head office of the world s leading premium chocolate manufacturer Lindt & Sprüngli has been based at Kilchberg, by Lake Zurich, since The innovative spirit of the promoterism period still thrives today. In the last 15 years alone, over CHF 300 million has been invested in expanding the site and modernizing machinery. With 900 full-time employees, Lindt & Sprüngli is now one of the biggest employers on the left bank of Lake Zurich.

16 1995 On the occassion of the 150 th anniversary of Lindt & Sprüngli, all Swiss households received a packet of chocolate in a largescale campaign as a token of appreciation for their many years of loyal custom. Kamillo Kitzmantel CEO of Chocoladefabriken Lindt & Sprüngli (Schweiz) AG for 15 years, and also regional manager for LINDT and CAFFAREL in Italy since Made in Switzerland The Swiss Cross is a guarantee of top quality. In the LINDT tourist range, every traveler can find a sweet souvenir for their family and friends back home. Lindt Festival du Chocolat Suisse Once a year, all LINDT employees flock to the sales outlets to offer consumers a taste of fine pralinés. The fact that the boss also joins in goes without saying. Rodolphe Lindt Inventor of the legendary conche which gives LINDT chocolate its delicate, melting quality to this day. Uncompromising quality The LINDT brand has been voted the most trusted chocolate by the readers of Reader s Digest magazine. We are incorporating the seal in our milk chocolate tablets.

17 14 M a r k e t s Annual R eport 2010 markets With six productions sites in Europe and two in the USA, 17 wholly owned subsidiary companies and many independent distribution partners, Lindt & Sprüngli is the leading supplier on the global premium chocolate market. The main markets are described in more detail below. On the retail side, the hard discount channels expanded further, in which LINDT products are still not available because of a selective distribution strategy. Commodity prices remained high, making it necessary for LINDT to impose selective price increases. SALES BY REGIONS Percentages Rest of World 5.1% Rest of Europa 7.4% Great Britain 5.0% Italy 11.5% North America 28.3% Germany 17.5% Despite the still relatively difficult economic environment, the Swiss subsidiary company achieved growth of 4.8%. With innovative product launches, together with a comprehensive and perfectly implemented marketing package, it once again succeeded in strengthening its premium positioning and gaining further market shares. LINDT improved its position in the praliné segment with the successful relaunch of its CONNAISSEURS range. Following a thorough review of the recipes and presentation of each individual praliné, these miniature works of art were introduced to consumers in a unique tasting selection. France 12.5% Switzerland 12.7% SwITZERLAND In 2010, Chocoladefabriken Lindt & Sprüngli (Schweiz) AG increased its sales by 4.8% to CHF million (previous year: CHF million) and is now back on track for success. Inaugurated by tennis champion and LINDT brand ambassador Roger Federer in Kilchberg, the magical LINDT Christmas Lighting Event was the highlight of the year. The economic environment improved steadily in 2010 with an accompanying upturn in consumer sentiment. However, the strong appreciation of the Swiss franc did have consequences for exports and tourism. For people living near the national borders, shopping in the euro zone became an increasingly attractive proposition. Despite a generally good Christmas business, in the year under review the chocolate market as a whole experienced a downturn in volume of 1.1%. In the tablet segment the new PASSION CHOCOLAT products launched in the spring soon became absolute bestsellers. The premium positioning of these innovative tablets is further enhanced by special recipes, an intensive taste experience and an artistic presentation. The LINDOR brand went from strength to strength and generated substantial growth, especially in seasonal business for Valentine s Day and Mother s Day, as well as at Easter and Christmas with attractive product variations. LINDOR truffles are now also on offer in selected retail outlets as a pick & mix variant, so meeting the need felt by consumers for greater individuality and diversity. Inaugurated by tennis champion and LINDT brand ambassador Roger Federer, to the applause of some 8,000 enthusiastic spectators, the magical LINDT Christmas Lighting Event was the highlight of the year. The spectacular Christmas light projections created an atmospheric mood on the factory frontage in Kilchberg throughout the Advent season. A reputation study of 50 top Swiss businesses conducted by GfK (a market research institution) ranked Lindt & Sprüngli

18 15 M a r k e t s Annual R eport 2010 in third place in The company is now one of the best and most respected in Switzerland, 165 years after its foundation. GERMANY In 2010 Chocoladefabriken Lindt & Sprüngli GmbH stepped up its sales by 6% to EUR million (previous year: EUR million), once again gaining market shares in every category. Against the background of global economic recovery, the German economy made substantial gains on the export side and in investments, with gross domestic product increasing by 3.6% overall. As the labor market recovered and consumer sentiment improved, private consumption also rose slightly by 0.5% after the decline in the previous year. The chocolate market in Germany as a whole did not benefit from the favorable economic trend, and shrank by 2.3% in 2010, largely because of aggressive price promotions. Despite this rather weak trend, LINDT did manage to step up its retail sales by a more than proportional figure and thereby win new market shares. Sales rose by 6% to reach EUR million. On the highly competitive market for chocolate tablets, LINDT gained market shares through targeted sampling offers. The tablet assortment was completed by the new Choco Crème and Eisspezialitäten lines and winter liqueur tablets. An appealing new narrow tablet format (pocket format) for selected chocolate tablets attracted further buyers. Praliné sales rose once again. This positive trend was driven mainly by the popular classics Hochfein and Mini-Pralinés which were supported by TV advertising and point of sale activities. With attractive new articles and extensive promotional activities, LINDOR products achieved high double-digit growth. The sustained success of GOLD BUNNY sales continued with above-average growth once again. Both existing products and additions to the range, such as the GOLD BUNNY family, contributed to this growth. In addition, new recipes and package formats in the important chocolate egg segment enabled LINDT to substantially extend its market leadership in the Easter segment yet again. With new products and successful point of sale activities, the Santa Claus range defended its strong position. Alongside new nut crunch offers, the introduction of Goldstücke helped LINDT to move even further ahead as the Christmas market leader. France In the year under review Lindt & Sprüngli SAS reported sales worth EUR million (previous year: EUR million) equivalent to 7.5% growth. In France, the total value of the chocolate market rose by 2.4%, explained largely by good Easter and Christmas sales. In this favorable environment, LINDT maintained its leading position in the seasonal business and was able to further improve its uncontested no. 1 position in the tablet segment. LINDT proved successful primarily because of its real ability to innovate with premium recipes which are particularly wellliked by consumers. The EXCELLENCE line of tablets proved enormously popular once again, achieved above-average growth and was augmented by new varieties such as Amandes Grillées in dark chocolate, Noisettes Croustillantes in milk chocolate and the Extra Velouté variant with white chocolate and vanilla from Madagascar. The filled CREATION tablets benefited from the introduction of new variations, including Le Praliné, La Truffe and Le Caramel with a hint of sea salt. All of the tablets were also supported by an extensive marketing package. At Easter, the GOLD BUNNY once again demonstrated its enormous potential. Together with the versatile LINDOR offering, double-digit growth was achieved and a decisive contribution made to total sales. The newly developed Internet campaign A GOLD BUNNY a smile proved extremely popular, reaching millions of consumers online.

19 16 M a r k e t s Annual R eport 2010 Following a two-year review and subsequent relaunch of the complete product range, the Christmas assortment benefited from optimized recipes and a more contemporary packaging design. Alongside the popular LINDOR offerings, the traditional CHAMPS-ELYSEES, PYRENEENS and CONNAIS- SEURS pralinés once again proved highly successful. Italy Lindt & Sprüngli SpA and Caffarel SpA stepped up their consolidated sales by 4.8% to EUR 215 million (previous year: EUR million). This was a considerable improvement on previous years which had been seriously affected by the global economic crisis. LINDT products retain their broad presence in all the modern distribution channels. CAFFAREL specialties are still only on sale in traditional outlets, where their strong position was further consolidated. LINDT once again proved to be the most dynamic brand on the Italian chocolate market; it performed strongly against the competition, and further extended its lead in the premium segment. Thanks to the focus on an improved shelf presentation and greater advertising support, LINDOR truffles achieved excellent growth. In the tablet segment, the range of traditional milk chocolate tablets proved exceptionally successful. The pick & mix offering was further extended to satisfy consumers taste preferences more effectively. This special concept gives the consumer an opportunity to put together a pralinés mix to his or her own liking, and is popular with most consumers. In the important Easter business, LINDT products generated higher than average sales. LINDT is one of the most important and most popular brands at this season, and is particularly well-established in the modern retail channels. Demand from consumers for the XXL chocolate eggs and LINDT GOLD BUNNY is especially strong. CAFFAREL specialties are once again making strong headway for the first time since the onset of the world economic crisis. The products continue to be available only through the traditional trade. While performance in this sector was extremely modest during the recession, the order situation reverted increasingly to normal during the year under review. A more intensive advertising campaign has firmly established consumer awareness of the CAFFAREL brand. The leading position in the traditional trade channel was consolidated and the export quota further increased. The launch of innovative new products such as Cuor di Frutta, dark chocolate pralinés containing a berry jam filling with high fruit content, proved particularly promising, and they quickly became bestsellers. AUSTRIA Lindt & Sprüngli (Austria) Ges.m.b.H. reported a positive trend in 2010 and further consolidated its market position. In addition, the consistent pursuit of many marketing activities enabled brand familiarity to be further increased. Following negative economic growth in the previous year, the Austrian economy recovered steadily in In particular, the gross domestic product increased by 1.9% due to rising exports. An equally pleasing trend was reported in the food retail trade, which gained 2.4% in In addition, the growing popularity of large mass retail outlets provides increasing space for a wider assortment. This resulted in a much better presentation of the LINDT product range. While the overall chocolate market rose by a rather modest 2.3%, Lindt & Sprüngli once again won new market shares with value growth of 4.5%. The fact that LINDT was able to achieve substantial growth on a tablet market which declined by 2% is particularly pleasing. The filled tablets, in particular summer variants in slim format, and the introduction of LES GRANDES and new fine-melting whole milk tablets, made a significant contribution to the good performance. In the praliné segment, Lindt & Sprüngli remains the leader in Austria and achieved significant successes, especially with the launch of LINDT Pralinés Elegance.

20 17 M a r k e t s Annual R eport 2010 Sentiment in the retail trade remained subdued in the early part of 2010, accompanied by rather slow Easter orders from the trade. For the first time, LINDT was therefore only able to achieve slow growth in this segment. Nevertheless, its result was better than that of the Easter market as a whole. In the course of the year, sentiment in the trade normalized and the LINDT Christmas assortment reported a very good result. SPAIN Lindt & Sprüngli (España) SA reported 6.3% growth in an extremely difficult economic environment with a flat market for chocolate, and consolidated its leading position on the Spanish chocolate market. General consumer sentiment was adversely affected in the first instance by the record unemployment rate of 20%. In this difficult economic environment, consumers were extremely sensitive to pricing, and looked around more than ever for attractive special offers and price promotions. While the leading brand suppliers were particularly affected by the prevailing economic conditions, private labels benefited considerably. The chocolate market, too, was hit by the prevailing negative consumer sentiment and, as had already been the case in the previous year, reported only very modest performance. In this extremely difficult market environment, Lindt & Sprüngli (España) SA managed to achieve sales growth of 6.3% to EUR 57.2 million, so gaining market shares and at the same time further extending its leadership on the chocolate market. In the praliné segment, LINDOR proved to be one of the foremost success drivers. The newly introduced pick & mix offer was well received by consumers. After a comprehensive review, our assorted pralinés were reintroduced on the market with new mixes, formats and packaging designed to appeal to all kinds of consumer needs. In the tablet segment, market shares were stepped up substantially. This was achieved in particular thanks to new variants such as EXCELLENCE 70% Mild. The filled CREATION and nutty LES GRANDES tablets were also successfully launched on the Spanish market. GREAT BRITAIN Lindt & Sprüngli (U.K.) Ltd. looks back on a highly successful business year. With a substantial sales gain of 17.1%, the British subsidiary company achieved an exceptional result on what is Europe s biggest chocolate market. In previous years, the United Kingdom had been severely affected by the worldwide financial and economic crisis, which still showed its effects in the year under review. The newly elected conservative government adopted an extensive package of austerity measures. Although the economic downturn slowed, the unemployment rate in the UK reached a 16-year high at 8%. While short-term economic data for the country remained weak, the chocolate market as a whole reported robust growth of 5%, attributable mainly to the Easter and tablet business. In this environment, with sales 17.1% higher, LINDT succeeded in achieving good above-average growth. This satisfactory progress is attributable primarily to the three core brands LINDOR, EXCELLENCE and GOLD BUNNY; they again gained substantial new market shares. In the year under review, more than three million LINDOR truffles were handed out to consumers for tasting in an extensive sampling campaign. The EXCELLENCE Milk tablet launch in spring was well received and has since shown highly promising growth. Dynamic expansion of the assortment in the convenience segment has taken place with suitable LINDOR and EXCELLENCE small formats. At Easter, the GOLD BUNNY was presented in an effective campaign by one of the country s key retail partners which organized a big Easter bunny treasure hunt. By now, the GOLD BUNNY has become a veritable Easter icon in Great Britain. Christmas business also made very good progress thanks to a product offering put together specially for the season.

21 18 M a r k e t s Annual R eport 2010 SCANDINAVIA Lindt & Sprüngli (Sweden) AB reported sales growth of 13.6% and succeeded in further consolidating its market position. Since July 2010, the Swedish subsidiary company has also covered the markets of Finland and Norway. After recovering very well from the global turbulence of recent years, the Swedish economy is in a solid condition. This positive upward trend was also reflected in improved consumer sentiment, despite a high unemployment rate of around 8%. The Swedish tablet and praliné market proved highly dynamic, with exceptionally strong growth, driven mainly by the large number of new products available from all the suppliers. In these two segments, LINDT is particularly wellestablished with an innovative offering of premium products. In the praliné business, the LINDOR brand was the focus of attention once again. In the past five years it has developed to become the most popular praliné article for Valentine s Day and Easter. The tablet business remained stable at a high level. EXCELLENCE defended its strong market position as the leading premium brand. In the filled tablet segment, both CREATION 70% and PETITS DESSERTS have now become firmly established. Poland Lindt & Sprüngli (Poland) Sp. z o.o. achieved sales growth of 4.7% and was able to strengthen its market position in a challenging economic environment. The Polish economy recovered from the global economic crisis, and in 2010 gained 3.5% against the previous year s figure of just 1.8%. However, the chocolate market remained flat because of rather subdued consumer sentiment eroded by a hot summer and the most catastrophic floods for 150 years. In this challenging environment Lindt & Sprüngli Sp. z o.o. managed to generate sales growth of 4.7%. Because of the very strong development of LINDOR, GOLD BUNNY and PETITS DESSERTS, new market shares were won in every segment. Thanks to a large-scale promotion campaign during which some two million LINDOR truffles were distributed on Valentine s Day, at Easter and at Christmas, consumers were convinced about the unique nature of the infinitely softmelting LINDOR quality. To extend the success reported by LINDT in Sweden to the other Scandinavian countries, activities in the neighboring countries of Finland and Norway were intensified and are now controlled by the Swedish subsidiary company. In Finland, LINDT has achieved a strong premium positioning in recent years, thanks to intensive cooperation with a leading Finnish department store chain. To enhance the position of LINDT chocolate, distribution was extended to further retail trade channels in 2010.

22 19 M a r k e t s AnnUAL r Eport 2010 REST OF CENTRAL AND EASTERN EUROPE These regions were affected by the consequences of the economic crisis, reflected primarily in a serious decline in the value of the currencies of Central and Eastern Europe, and a rapid rise in unemployment. In Russia, the economic situation began to recover slowly after the previous year s recession. High unemployment, sustained inflation and currency fluctuations did, however, impede the economic upturn in this country, which still holds great potential for LINDT. The development of the Russian chocolate market suffered a severe setback, largely because of the exceptional heat wave in the summer of LINDT products were unable to escape this trend entirely, but did settle down at a satisfactory level as the year progressed. In the year under review, continuing investments were therefore made in advertising and promotions. LINDOR and EXCELLENCE were given additional support during the important festive season through TV advertising in the big cities of Moscow and St Petersburg. Business in Romania and Hungary reported somewhat modest growth. Nevertheless, here too continuous investments were made in the brand. The foundation stone was accordingly laid for future growth as soon as the economic environment stabilizes. Ukraine and the CIS countries recovered as the reporting year progressed, and LINDT was able to report healthy double-digit growth. The Czech subsidiary company, which was founded in 2008, also handles the Slovakian market and is making constant progress. The core LINDOR brand proved particularly successful with high double-digit sales growth and significant market share gains. NORTH AMERICA With the LINDT and GHIRARDELLI brands in the USA, and also with LINDT in Canada, Lindt & Sprüngli stepped up its cumulative sales in this region by 10.7% to USD million (previous year: USD million). LINDT and GHIRARDELLI once again shared this leading position and proved to be the fastest-growing chocolate brands. LINDOR, EXCELLENCE and GHIRARDELLI SQUARES in particular reported robust growth in terms of sales and market shares. The North American economy recovered slowly from the global recession and the overall chocolate market achieved further growth. Lindt & Sprüngli (USA) Inc. reported sales growth of 8.2% in 2010, in an environment of intense competition. This good performance was achieved against the background of a continuing high rate of unemployment which, despite the better general economic situation, still makes for subdued consumer sentiment. Nevertheless, LINDT succeeded in further extending its leading position in the premium segment. The main growth drivers were LINDOR and EXCELLENCE, which performed particularly well overall. In 2010, both brands moved up to join the top ten of all products in the US confectionery sector. To better satisfy the constant growth in demand for LINDT chocolate, important investment projects were completed in the year under review to increase production capacity on site. One of the most striking examples here is the new cocoa mass production plant which was commissioned in early As a result, the US plant is now perfectly equipped to handle every stage of cocoa processing from the bean to the finished and packaged product. In addition, a further LINDOR truffles facility and the first tablet plant of the US subsidiary company began to operate at full capacity. The investments involved contributed to a substantial improvement in the availability of goods and in the cost structure.

23 20 Mark ets Annual R eport 2010 The Ghirardelli Chocolate Company was founded some 160 years ago in San Francisco and reported exceptionally high growth of 13.4% in With this above average result the company s market position was greatly extended and strengthened. All business areas and product categories performed well. In particular, SQUARES, the INTENSE DARK line of tablets and many seasonal creations for Valentine s Day and Christmas were the growth drivers, and made a decisive contribution to the very strong development. National advertising campaigns, especially during the Christmas season, further enhanced brand familiarity and additionally boosted demand for GHIRARDELLI products. The shops and restaurants of the Ghirardelli Chocolate Company once again proved particularly popular with consumers, and attracted a great many visitors from all over the world. Strong growth was also reported by the online shop, from which consumers were able to place direct orders for selected products as gifts for others or for themselves. Lindt & Sprüngli (Canada) Inc. far outstripped the general market trend with double-digit sales growth of 10.1% and won new market shares. Although the recession in Canada is now largely behind us, some aftermaths were still felt. Trade in the year under review was rather subdued. Nevertheless, the chocolate market in Canada did prove highly dynamic, especially in the premium segment. LINDT was the growth leader in the premium sector, well ahead of its competitors. Its strong position was further extended in both the all-year and seasonal business. The three key brands LINDOR, EXCELLENCE and GOLD BUNNY have now become the uncontested number one chocolate brands in Canada. But the products in the PETITS DES- SERTS, LES GRANDES and SWISS CLASSIC tablet lines also reported good results. Stronger communication measures during the year under review helped greatly to make consumers better aware of the LINDT brand. This was confirmed by an Ipsos survey which showed LINDT to be the chocolate manufacturer with the highest brand value in Canada. Lindt & Sprüngli de Mexico SA de CV handed over distribution of LINDT products in Mexico to a local distribution partner in the year under review. This will permit a more efficient canvassing of the market. Australia Lindt & Sprüngli (Australia) Pty. Ltd. fell slightly short of expectations in a challenging trading environment in The impact of the global financial crisis on the Australian economy was comparatively small. The unemployment rate even declined. Nevertheless, the overall chocolate market grew by only a low 2% and was mainly price-driven. Negotiations with the trade partners proved correspondingly challenging. As the leading brand in the premium segment, LINDT escaped from this price competition and relinquished unprofitable growth in the wholesale channels. Lindt & Sprüngli is convinced that the right long-term positioning is more important than short-term sales increases. On the other hand, the retail concpet the LINDT Chocolat Cafés grew very satisfactorily with concept. The highlight of 2010 was the inauguration of the second LINDT Chocolat Café in Melbourne at the beginning of the year, by tennis champion and LINDT brand ambassador Roger Federer, who was in the country for the Australian Open. In view of the growing popularity of the LINDT Chocolat Cafés, further openings elsewhere are being planned. To canvass the Australian market still more intensively in future, the intention is to support the key brands of LINDOR, EXCELLENCE and GOLD BUNNY even more strongly with accompanying market activities and advertising.

24 21 Mark ets Annual R eport 2010 ASIa In a favorable economic environment, Lindt & Sprüngli (Asia-Pacific) Ltd. once again achieved high two-figure growth rates. Especially on the key Asian markets of Japan and Hong Kong, LINDT s presence was greatly extended. Most of the Asian economies reported strong growth in In particular, the People s Republic of China once again achieved double-digit expansion which has been continuing now for decades. In this environment, the chocolate markets of the region developed further. Admittedly, chocolate consumption is still relatively low, but the trend is on the rise. By the same token, the premium chocolate segment is also beginning to become established, slowly, but surely. In Japan a new subsidiary company was founded in 2010, and the first LINDT Chocolat Café on Asian soil was opened in Tokyo. Japanese consumers now have the opportunity to enjoy LINDT chocolate and selected patisserie specialties at a prominent location in the elegant shopping district of Ginza. This will further enhance the already high level of brand familiarity of LINDT in Japan. Sales in Hong Kong and China expanded significantly in LINDOR truffles remain a popular gift at Christmas and for the Chinese New Year. With attractive premium gift offerings, LINDT has become established as the preferred supplier of quality chocolate. The classical SWISS MILK tablets and those in the EXCELLENCE line with a high cocoa content once again recorded double-digit growth in Overall, LINDT increased its market share greatly and further enhanced brand familiarity. In South East Asia, LINDT is making good progress in Singapore and Thailand in particular. Its presence at selected points of sale was substantially increased. In these tropical countries, SWISS CLASSIC and EXCELLENCE tablets are selling very well despite the high temperatures which prevail throughout the year. On the Indian market too, which is growing at an exceptionally fast pace, LINDT products are now available at exclusive points of sale. near east/africa In the Near East, the long-standing double-digit sales growth was again maintained in The South African market was boosted by the large numbers of tourists attending the world football championship held there. LINDT is wellestablished locally in the leading premium segment with its EXCELLENCE and LINDOR brands, as regular consumer surveys confirm. In the United Arab Emirates, the leading position in the tablet segment in the modern trade was further extended thanks to the popular EXCELLENCE and PETITS DESSERTS products. Duty Free/Travel Retail After a challenging previous year, Lindt & Sprüngli s Travel Retail business reported a pleasing development in With the general easing of the economic situation, consumer sentiment improved considerably, and passenger numbers in the airports began to rise again. This also had a positive impact on the sales trend. LINDT was able to win further market shares and consolidate its leadership in this segment. The trend is particularly positive in South America and Asia: high double-digit growth rates were achieved in both these markets. In the year under review, the LINDT Maîtres Chocolatiers managed once again to delight connoisseurs of the finest chocolate creations all over the world with their unique innovations. The prestigious new Maître Chocolatier line, consisting of Truffes, Perles, Mini Pralinés and Carrés-Pralinés, specially created for duty-free sales, holds out the prospect of a delicious taste experience, and appeals to consumers with its sophisticated and exclusive design. In addition, the success story of LINDOR continued with the launch of the Milk Collection sampling box. SWISS PREMIUM NAPOLITAINS and the popular large-format gold and silver tablets were again the bestsellers in the existing range.